One of Scotland's largest companies warns businesses are likely to be hit with
tax increases if independence goes ahead

Scottish independence poses “substantial risks” to the quality of life of millions of people and would likely result in tax hikes, according to a report commissioned by one of the country’s most successful firms.

The study, prepared by eminent economists for the FTSE 100-listed Weir Group, concluded that leaving the UK would impose substantial costs regardless of which currency was adopted and the supposed benefits were “uncertain”.

It raised the prospect of cuts to private pensions, increased mortgage and borrowing costs, £9 billion of public spending cuts, £1.3 billion of cross-Border transaction costs in the first year alone and reductions in exports to the remainder of the UK.

Keith Cochrane, the engineering giant’s chief executive, warned a Yes vote in September would prompt the company would review its operations north of the Border, where it is headquartered and employs 600 of its 15,000 workforce.

Mr Cochrane said the 80-page report provided a “clear examination of the facts” and contrasted this with the Scottish Government’s White Paper on independence, which he said was a “political document” that painted separation as a “risk-free option”.

Declining North Sea oil revenues and a more rapidly ageing population means a separate Scotland would likely “need to tax Scottish business overall more heavily”, it concluded.

SNP ministers said the analysis had been “overtaken” by an anonymous UK minister last weekend claiming there would be a currency union in return for Scotland keeping Trident.

But unionist politicians said the “evidence-based” report was the latest in a series of major interventions by big business that showed being part of the UK increases prosperity and keeps down costs for Scottish families.

The Tories calculated that companies employing more than 50,000 Scots have made public their concerns about separation in recent weeks, along with trade bodies representing firms with half a million employees.

Unveiling the report at the Weir Group’s Glasgow headquarters, Mr Cochrane said Scots should cast their votes based on “what would happen in reality” rather than the “assertions of campaigners.”

“Unsurprisingly, as a political document, the Scottish Government’s White Paper paints a picture of independence as being a risk-free option with only potential benefits,” he said.

“However, voters should be aware that what they are being asked to say Yes to carries substantial risks to our economy and therefore to the quality of life of millions of people.”

He confirmed that he was voting No and, highlighting his 30 years of negotiating experience, warned an independent Scotland would not get everything it wanted in its divorce settlement with the UK.

Referring to the Chancellor’s rejection of Alex Salmond’s plan to share the pound, he said Scotland “doesn’t seem to have a willing seller” on the currency.

Mr Cochrane said it was too early to consider whether the Weir Group would move headquarters or operations south of the Border but a review would be conducted following a Yes vote.

His intervention was particularly damaging for the nationalists as the company was founded in the west of Scotland by two brothers in 1871 and has grown into a global engineering giant with revenues of more than £2.4 billion last year.

The report, written by Oxford Economics, focused on the ramifications of independence for the currency, corporation tax rates, trade and pensions.

A new Scottish currency would cost £800 million to set up and £500 million of annual transaction fees with the remainder of the UK, the analysis said.

Even if the Chancellor changed his mind about a currency union, the economists estimated Scotland would have to make extra spending cuts of £9 billion a year to get its debts down to a level that would be acceptable to Westminster.

A separate Scotland would face higher borrowing costs regardless of which currency it adopted, the report said, estimating this would add £10 million in annual interest payments for every £1 billion borrowed.

The impact on business, particularly small and medium-sized firms, would be “significant” as they would have to pay their banks more for their lending, it said.

The analysis welcomed Mr Salmond’s proposal to cut corporation tax by 3p in the pound but warned it would take between six and 15 years for the extra tax revenues to outweigh the cost.

It said the cut would have saved the Weir Group £400,000 last year but the loss of “group relief” would have cost it nearly nine times that sum.

This allows it to reduce its tax bill by offsetting losses in one part of the UK against profits made in other parts.

Mr Cochrane said it was “common sense” that independence would harm trade with the remainder of the UK by creating additional red tape as “obeying two sets of rules is more expensive than obeying one.”

EU rules would also force the Weir Group to break up its UK-wide pension scheme or pay off its £60 million deficit more quickly than planned, he said. The analysis warned companies may be forced to cut staff pension benefits to afford the costs.

Alistair Darling, the leader of the pro-UK Better Together campaign, said: “This is an important evidence based report from another large employer in Scotland, which makes the positive case for Scotland remaining in the UK.”

Ruth Davidson, the Scottish Tory leader, used First Minister’s Questions to list a series of companies including Standard Life, BAE Systems and BP that have expressed concerns about independence.

Adding the Weir Group's workforce to the total number of people they employ, she said: “With 50,000 workers on their books in Scotland alone, the SNP can no longer be so dismissive over their warnings.”

But John Swinney, the Scottish Finance Minister, said large manufacturing companies fare better in small countries. He added: “The concerns in this report have been overtaken by the revelation from a UK minister that if Scotland votes for independence there will be a currency union.”